Once again, the Rand has turned the tables on the Dollar, as we saw a massive push back below R15...

The ZAR never ceases to amaze, as in amongst the local turmoil, it produces a run on the USD.

But it was not just the Rand, as we saw most of the field outperforming the drooping Dollar again.

Negative sentiment is certainly around an extreme on the world's reserve currency, and this is a sure sign that we are due for a turn soon...

...but for now, the Rand is the beneficiary!

Let's get into the full review.

Before we get into the week's activities, here were some of biggest headlines from the 5 days:

  • SONA - with a daunting mountain to climb, Ramaphosa did his best to paint a picture of hope, and a hard line on corruption...
  • Vaccine Rollout - with the playing field changing day by day, everyone is left wondering what will happen next and if economies can really pin their hopes on the immunization restarting economies
  • US Stimulus - while Biden continues a flurry of executive orders, Congress does not appear any more efficient than previous years to pass the bills to get the economy up and running, as they hit more gridlocks...
  • GBP & Oil Run - huge gains for two overlooked market in the last few months have really started to catch some attention.

Trump Impeachment Senate Hearing - and then of course we had the start of Donald Trump's impeachment hearing before the Senate, which was expected to be dead in the water before it even started.
For the local unit, we opened at R14.92, a massive gap from where we had closed on Friday at R14.81...

...but nature hates a vacuum and more often than not the market is drawn back to fill this price gap.

Which is just what we saw, as the market returned speedily back to the R14.80 levels, before weakening again.

Many things could have triggered this, but one of the big pieces of news was that the the 1 million AstraZeneca rollout that was scheduled to start mid-February has been halted due to disappointing test results against the newly found variant.

Minister of Health Dr Zweli Mkhize announced on Sunday that additional tests will be performed in order to ensure that it will be used where it is the most effective. It is now, once again, a waiting game for the J&J and Pfizer shipments to arrive in the coming weeks.

And reportedly, the J&J rollout should cover the RSA variant, which was a serious concern.

But all these vaccines remain experimental ones, and serious questions remain as to their actual effectiveness and requirement in order to get economies fully up and running?

And of course, along with that, is pushing endless amounts of stimulus into the economy (which is going to have to be paid for at some point) really what is needed?

And then in other news:

President Ramaphosa's SONA address was one filled with enthusiasm as always, but he had a tough mountain to climb. Here is his speech at a glance:

  • President Cyril Ramaphosa has laid out four pillars that the government is focused on for this year dealing with the pandemic: accelerating economic recovery: creating jobs and inclusive economic growth and fighting corruption and strengthen the state.
  • He talked tough on corruption, vowing that the government will shortly be appointing the members of the National Anti-Corruption Advisory Council, which is a multi-sectoral body, which will report to the entire Parliament - not just the ruling party,
  • He hinted that local government elections will go ahead this year.
  • Ramaphosa said that Eskom - the largest producer of greenhouse gasses - has committed to a net zero emissions by 2050. Eskom will be looking to partner with investors to repurpose and repower part of its coal fleet.
  • For economic recovery, the president said government's relief programs during the pandemic have aided millions
  • He said the government is working on the rollout of infrastructure, local production, local stimulus to increase jobs, and rapid expansion of energy generation.
  • Ramaphosa once again spoke of the government creating new "smart cities", saying they are being conceptualised in several places in the country. The draft masterplan for the Lanseria smart city, for example, has already been completed.
  • There is also a priority intervention to rollout broadband capabilities to schools, police stations, and other public places.
  • He said government has committed to buying locally-made products, and he encouraged the public to purchase locally made.
  • He pledged that the country "will rise again" like the fynbos tree - currently in bloom in Cape Town - from the economic and social fallout due to the virus. He said 2021 must be a year of "rebirth", and "we must do things that will make us rise"

These are great promises, but this will always be a case of whether they can be implemented or not… He has a real challenge with annual business confidence in 2020 being worse than during apartheid economic sanctions.

  • And then in the USA, with the Dollar continuing to weaken, the rising risk appetite seems to be riding the trillion dollar stimulus wave. A new piece of legislation put forward yesterday by the House Democrats proposed up to a $3k per child payment to all families under the $75k per year (single parent) or $150k per year (both parents) mark, with a possible permanent implementation of the legislation… But facing the Congress vote is going to be a challenge as always, as Biden will require 60 votes from Congress to roll out his proposed relief plan. This would require support from several key opposition members.
  • In other global markets, we saw the British pound rise to its best level against the Dollar since April 2018, nearly 3 years ago! This gives some idea of the pain of the Dollar over the last months. Oil too because to really grab some headlines, as it hit 13 month highs, going back to pre-pandemic levels. After the oil crash of last year, it is most fascinating to see this return again, proving the irrational nature of markets - because in essence, what has changed from a year ago? The situation is worse, persons are just hoping for a better 2021. This is all the sentiment of humans trading the markets, and emotions that are running wild. Fascinating to watch in markets when you know what is going on...!
  • Bitcoin, love it or hate it, is here to stay and continues to make headlines. This week saw an amazing blowout to over 48,000 - hitting all time highs. We in fact called this, back in March 2019 when we predicted BTCUSD to climb from where it was at $3900, all the way up to $43000. This last week, 23 months later, we had our forecast validated. What an amazing run! Get more info on our Bitcoin forecasts over here

To get back to the Rand, despite all reason for worry, we saw the local unit break to R14.50s again on Friday afternoon, nearing that much anticipated R14.50 level again.

Will the Dollar make a recovery…or will we see the Rand break lower?

Join us for the week ahead to see!

The Week Ahead (16-20 February 2021)

As we look to the week ahead, apart from all of the other points we have discussed, there were a number of economic events:

  • SA - Inflation Rate, Retail Sales
  • USA - Retail Sales, FOMC Minutes, Jobless Claims, GDP
  • UK & EU - CPI, ECB Monetary Policy, UK Unemployment Rate

So a few potential triggers here that could provide some spark for some moves.

Of interest, across in the US, as the Senate impeachment trial completes, several cases related to significant US election fraud are slated to be heard in the US Supreme Court in the next week or two, which could prove fascinating (as big tech & media continue to dismiss the mounting evidence as 'baseless claims').

As for the Rand, it has certainly shown some teeth the past week or two, but this next week is pivotal and we are watching several price points to confirm our wave patterns (based on our Elliott Wave based forecasting system) and give us some direction for the days, weeks and months ahead.

Please take our Rand forecasting service for a test-drive!

This will give you access to the same charts we are to give us and our clients the likely direction of the Rand - ahead of time, enabling you to make educated and informed decision.

Simply use the link below to get access now. No charge. No card. All yours to trial for 14 days.

Click here now to start your free trial

(You don't want to regret not having done so this time next week...)

Look forward to hearing from you.

To your success~

James Paynter

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